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Wheeling & Lake Erie Railway Co. v. Maine Northern Railway Co.

United States District Court, D. Maine

September 15, 2015



Nancy Torresen United States Chief District Judge

The Plaintiff Wheeling & Lake Erie Railway Company (“Plaintiff” or “Wheeling”) seeks to collect money from Maine Northern Railway Company and New Brunswick Southern Railway Company Limited (together, the “Defendants”) pursuant to a security agreement with Montreal, Maine & Atlantic Railway, Ltd., and its affiliates (“MMA U.S.”). The Defendants owed money to MMA U.S., and these accounts receivable were assigned to the Plaintiff as part of a security agreement between the Plaintiff and MMA U.S. The Defendants claim, among other defenses, that they have valid rights of recoupment or set-off that exceed the amounts sought by the Plaintiff. Most relevant to this Order, the Defendants argue that the Plaintiff’s claims are barred by the 11 M.R.S. § 9-1404(1)(b) (2014) because the Defendants’ rights of set-off and/or recoupment accrued prior to the time they received authenticated notification from either the Plaintiff or MMA U.S. of Plaintiff’s purported security interest in MMA US’s accounts receivable. Defs.’ Joint Answer ¶ 25 (ECF No. 7).

At issue in these cross-motions for partial summary judgment is whether the Defendants received the required notice cutting off subsequent claims and defenses when they obtained credit reports from Dun & Bradstreet (“D&B”) indicating the existence of the Plaintiff’s security interest. For the following reasons, I GRANT the Defendants’ motion for partial summary judgment. Because the credit reports did not constitute the required notice under 11 M.R.S. § 9-1404, the Plaintiff’s rights as a secured creditor are subject to all claims and defenses of the Defendants that had accrued at the time MMA U.S. filed its petition for bankruptcy relief in 2013.


The parties have submitted their motions on a stipulated record, [1] which includes the following pertinent facts. In 2009, MMA U.S. and certain affiliates received a line of credit from Wheeling and executed a security agreement assigning an interest in MMA U.S.’s accounts receivable to Wheeling. Wheeling subsequently perfected this security interest by filing a financing statement with the Delaware Secretary of State. On August 7, 2013, MMA U.S. filed a petition for Chapter 11 bankruptcy relief in the United States Bankruptcy Court for the District of Maine, initiating a bankruptcy case that is currently pending and invoking the bankruptcy code’s “automatic stay” provisions.[2] MMA U.S. filed a motion with its petition that referred to Wheeling’s security interest in MMA U.S.’s accounts receivable. Debtor’s Motion for Order Pursuant to 11 U.S.C. §§ 361, 362, and 363: (I) Authorizing Debtor to Use of Cash Collateral on Interim Basis; and (II) Scheduling a Hearing to Consider the Use of Cash Collateral on a Final Basis or (“August 7, 2013 motion”), Case No. 13-10670, (Bankr. Me.) (ECF No. 5). The Defendants received the August 7, 2013 motion the day after they entered appearances in the bankruptcy case and filed proofs of claims for debt owed by MMA U.S. to the Defendants.[3] See Stipulation of Facts ¶ 13. In a letter dated September 10, 2013, Plaintiff’s counsel also informed the Defendants’ counsel of Wheeling’s security interest.

Prior to their receipt of MMA U.S.’s August 7, 2017 motion and the September 10, 2013 letter from Plaintiff’s counsel, on April 16, 2010 and August 30, 2012, the Defendants obtained credit reports directly from D&B identifying Wheeling’s security interest in the “[i]nventory and proceeds – [a]ccount(s) and proceeds” of MMA U.S. See Stipulation of Facts, Exs. M and N. The parties agree that any set-off claim by Defendants accrued after the Defendants obtained the first D&B report on April 16, 2010.

The parties dispute the amounts that are owed by the Defendants to MMA U.S. (thus to Wheeling) and what rights of set-off or recoupment the Defendants have based on amounts owed to them by MMA U.S. The Plaintiff filed suit in this court on August 14, 2014. The parties have filed cross-motions for partial summary judgment on the limited question of whether the D&B credit reports provided the required notice under Maine law that would cut off the Defendants’ subsequent claims and defenses against Wheeling.


Summary judgment may only be granted “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). When parties file cross-motions for summary judgment, my role is to “determine whether either of the parties deserves judgment as a matter of law on [the] facts that are not disputed.” Showtime Entm’t, LLC v. Town of Mendon, 769 F.3d 61, 69 (1st Cir. 2014) (alteration in original) (citation omitted).


The purely legal question presented by the cross-motions for summary judgment turns on the interpretation of one provision of Maine’s version of the Uniform Commercial Code (“UCC”) dealing with the rights of account debtors as against assignees. 11 M.R.S. § 9-1404(1)(b).[4] At issue is whether, under the statute, the receipt of a D&B report constitutes sufficient notice to foreclose the rights of the account debtors as against the assignor.

I. Principles of Statutory Construction

“The language of an unambiguous statute typically determines its meaning.” United States v. Hilario, 218 F.3d 19, 23 (1st Cir. 2000); see also In re Fahey, 779 F.3d 1, 9 (1st Cir. 2015) (“The plain meaning of legislation should be conclusive, except in the ‘rare cases [in which] the literal application of a statute will produce a result demonstrably at odds with the intention of its drafters.’”) (alteration in original) (citation omitted); Carrier v. Sec’y of State, 60 A.3d 1241, 1245 (explaining that “[w]hen a statute is unambiguous, we interpret the statute directly” without recourse to rules of statutory construction, legislative history, or other “extraneous aids.”) (citation omitted); Connecticut Nat’l Bank v. Germain, 503 U.S. 249, 253–54 (1992) (“We have stated again and again that courts must presume that a legislature says in a statute what it means and means in a statute what it says there. When the words of a statute are unambiguous, then, this first canon is also the last: ‘judicial inquiry is complete.’”) (citations omitted). “A statute is ambiguous if it is reasonably susceptible to different interpretations.” Estate of Joyce v. Commercial Welding Co., 55 A.3d 411, 415 (Me. 2012).

In determining whether the language of a statute is plain, I am guided by fundamental principles of statutory construction, including: (1) that the statute’s words must be read “in their context and with a view to their place in the overall statutory scheme, ” King v. Burwell, 135 S.Ct. 2480, 2489 (2015) (quoting FDA v. Brown & Williamson Tobacco Corp., 529 U.S. 120, 133 (2000)); and (2) that my interpretation must “give effect, if possible, to every clause and word of [the] statute.” See id. at 2498 (Scalia, J., dissenting) (quoting an “elementary principle” from Montclair v. Ramsdell, 107 U.S. 147, 152 (1883)); United ...

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